Looking to Science for Investment Advice

For the last several days, I have been in Seattle at the Discovery Institute helping teach some 25 Gilder Fellows lessons about the economy and the universe.

Since I helped found Discovery over two decades ago with former Reagan official Bruce Chapman, it has emerged as a national think tank pursuing such subjects as transportation policy, education, biotech, and evolution. We like to believe that it expresses an intelligent design, and a unified vision that transcends all its divisions.

Discovery was founded with the belief that the universe possesses meaning and intelligence — that human minds echo a larger consciousness and order.

The science of Discovery follows the insights of a great new discipline called Information Theory.

The foundation of all information and communications technology that underlies our wealth and future, information theory upholds the idea of a hierarchical universe.

And this belief has relevance for both scientists and investors.

Here’s what I mean…

A Lesson to be Learned From Science

Across the sciences,, the recent triumphs of information theory uphold a hierarchical universe.

In the greatest mathematical discovery of the 20th century, Kurt Godel proved it in 1931 in his famous incompleteness theorem.

Every logical scheme, even mathematics itself, is necessarily dependent on axioms outside the scheme that cannot be proved within it.

Alan Turing and John von Neumann extended this view to the proposition that all computing machines must have outside programmers. No matter how much you know about the material substance of a computer, you cannot grasp what a computer is doing without finding the source code.

Now, in a computer, as information theory shows, the content is manifestly independent of its material substrate.

No possible knowledge of the computer’s materials can yield any information whatsoever about the actual content of its computations. In the usual hierarchy of causation, they reflect the software used to program the device; and, like the design of the computer itself, the software is contrived by human intelligence.

Another way to put it…

To grasp reality, you have to look up rather than down. You have to aspire rather than despair or deny. You have to seek singularities rather than average them to banalities.

Yet economists not only deny creativity to the divine; they also deny it to human beings.

Economic models reduce the human agent to a function of outside forces, essentially a Skinner box of stimuli and responses.

They focus on incentives rather than creativity.

As a result, many economists are left with a model of capitalism that is driven by greed rather than by aspiration.

Today’s Prophecy

You cannot find anything new from an old place. You cannot invest with a rear-view mirror.

You cannot have an assured path to the future even by surveying the visible landscape in front of you.

You cannot find safety in numbers or even in big data. You have to “leap before you look.” Faith precedes knowledge.

This attitude of aspiration and creative discovery — vertical ambition for creative meaning rather than horizontal submission to random reductionism — is the heart of all enterprise and investment. Finding the purpose in nature and us.